Technical weekly outlook and review

Pound Sterling sustained further losses for the third consecutive week last week, losing 50 pips into the close 1.5511. In spite of this, price was unable to close below the weekly swap level coming in at 1.5451. Looking down to the daily timeframe , we can see that additional support came into this market from a daily demand area at 1.5189-1.5345, which, as you can see, eventually forced price to cross swords with a daily supply zone at 1.5627-1.5531.

In the same way the Euro surged higher on Friday, the GBP also spring boarded north. This took out not only a 4hr swap area at 1.5440-1.5402, but also a 4hr supply zone seen at 1.5485-1.5460, which eventually saw price marry up with a 4hr swap level at 1.5544 that held the market lower into the weekend.

Moving forward, Sunday’s open 1.5494 saw the market gap south 14 pips, which technically has made very little difference as price remains trading between a 4hr swap level at 1.5544, and a 4hr swap area at 1.5485-1.5460. One could if they so wished attempt to trade in between this temporary 4hr range today. With a small enough stop, the risk/reward could still work out very favorable targeting the opposing range limit.

Should the market breakout north his week, however, it is likely price will steam higher to connect with a 4hr supply area at 1.5627-1.5597. Buying the breakout here is out of the question for us. What we are interested in though is fading the said 4hr supply zone, since it converges with not only a Fibonacci retracement value of 0.50%, but also a round number level at 1.5600. On top of all this, it is also lodged deep within the aforementioned daily supply area. Usually, we would consider setting a pending sell order here, but seeing as the weekly timeframe currently shows supportive pressure from a weekly swap level at 1.5451, we’re going to need some sort of lower timeframe sell signal here before risking capital.

In the event that this market decides to push below the current 4hr swap area this week, we will most definitely be interested in trading any confirmed retest seen of this area, targeting the 4hr demand area at 1.5342-1.5377. Confirmation is required here since even though we’re trading from daily supply at the moment, we would at the same time be going up against weekly support (see above for levels), so caution is advised. Should all go to plan and price hits target, this would be a good place to begin looking for longs into this market since this 4hr demand area is not only very strong in appearance, but also converges just beautifully with a 4hr trendline extended from the low 1.5169.